Nov. 1 (Bloomberg) -- Macquarie Group Ltd., Australia’s
largest investment bank, rose to a three-and-a-half-year high
after it proposed to distribute to shareholders its stake in
Sydney Airport and said first-half profit climbed 39 percent.

Shareholders will be asked to approve a transaction in
which they will receive in February one Sydney Airport security
for each Macquarie share they own, while the group would book a
A$377 million (A$357 million) gain, the bank based in
Australia’s largest city said in a statement today.

The proposal will leave Macquarie without a significant
stake in Sydney Airport, Australia’s biggest, for the first time
since 2002, when a group led by the bank agreed to buy the
state-run facility for A$5.59 billion. Macquarie will have about
1.3 percent stake of the company, down from 16.8 percent now,
data compiled by Bloomberg show.

“The proposed Sydney Airport distribution is a substantial
and welcome capital management initiative, which should be well
received,” Credit Suisse AG analysts led by Sydney-based James
Ellis said in a note to investors.

Macquarie shares climbed 4.4 percent to A$53.20 at 12:00
p.m. in Sydney on track for the highest close since Feb. 4,
2010. That extended gains for the year to 50 percent. The
benchmark S&P/ASX 200 index was steady. Sydney Airport shares
dropped 2.7 percent to A$4.075 giving it a market value of A$8.9
billion.

Profit Surge

Macquarie’s profit for the six months ended Sept. 30 rose
to A$501 million ($474 million) from A$361 million a year
earlier and the bank expects higher profit in the second half,
the firm said in a statement today.

The bank’s “strong balance sheet and excess regulatory
capital” mean it is a good time for the transaction, Chief
Executive Officer Nicholas Moore said in the statement.

The security distribution is “a smart way of paying a
special dividend,” said Morningstar Inc. analyst David Ellis.

Macquarie’s move to reduce its stake follows a government
plan to set a timeline for construction of a second major
airport in the city. Authorities will identify a preferred site
by early next year, Deputy Prime Minister Warren Truss told
Australian Broadcasting Corp. radio Oct. 11.